How Amazon turned Prime Day into a dizzying shopping extravaganza

If you’ve been lured into trying a 30-day free Amazon Prime trial, good luck with cancelling it this week. Instead, you’ll be offered to extend it for another 30 days – again, for free. The reason: Amazon is gearing up for its biggest annual sales event, Prime Day, which starts on July 16 at 12:00 BST. This year’s extravaganza lasts 36 hours – six hours longer than ever before.

For Amazon, Prime Day is a powerful marketing tool. There are now more than 100 million Prime members, with some 16 per cent of them signed up for the sole purpose of getting access to Prime Day promotions. A whopping 32 per cent of all subscribers, meanwhile, did indeed click on the buy button on last year’s Prime Day, according to a survey by retail consultancy Global Data. Last year, Amazon’s Prime Day turnover soared 50 per cent on the previous year, and it was also the company’s biggest ever day for signing up new members.

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Not bad for a shopping event that was invented just three years ago, in 2015, to celebrate the 20th anniversary of Amazon’s launch. Ever since, it’s become a red letter day in the (Western) digital shopping calendar.

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What was designed to drum up business during the summer lull and steal some of the thunder from Black Friday – “mission accomplished,” says Matti Littunen from Enders Analysis. It’s been ‘anniversaried’ ever since, quickly becoming the e-shopping giant’s largest annual trading event, easily surpassing Black Friday and the pre-Christmas Cyber Monday.

At the heart of it, though, the event is an aggressive marketing tool for Amazon’s Prime subscription service. “What Amazon is really selling on Prime day is Prime itself”, says Littunen. And the timing of Prime Day and Black Friday, followed by Christmas, at a few months intervals “nicely acts as a recurring reason to stay on as a Prime subscriber,” he adds.

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Prime underpins pretty much everything at Amazon. In his 2015 letter to shareholders, Jeff Bezos said that the firm wanted “Prime to be such good value, you’d be irresponsible not to be a member.” And in the face of rising competition, Prime is rather crucial. “Prime members buy more from Amazon and it locks them in – to a degree – to the Amazon ecosystem,” says Nick Carroll, an analyst from Mintel.

This thinking extends to Prime Day. According to Forrester, 18 per cent of all online consumers said they shopped on Prime Day last year on Amazon. It’s “a way of keeping Prime members engaged with the programme whilst creating retail demand,” says Carroll.

While Amazon doesn’t release hard data about the billions of dollars it makes on Prime days, data from Mintel’s Online Retailing UK July 2018 reportclaims that a quarter of UK consumers are already hooked.

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While sales at the end of July are nothing new in retail – it’s a key period for many seasonal discounts – Amazon has single-handedly changed buying patterns of shoppers. With Prime Day and Black Friday, Amazon shoppers now know they have two mega sale days in the summer and winter.

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While Amazon Prime membership keeps growing, the competition is not sitting idly by. Rivals, especially large ones, are now trying to stay on par with Amazon by optimising their Black Friday deals. And both ao.com and Currys PC World – Amazon’s two key UK rivals in electricals – ran promotional events in response to Prime Day on the same day in 2017.

There are broader issues for the retail sector, too, particularly online. These events, combined with continuous discounting throughout the year, mean customers have been trained not to pay full price. For Amazon this is less of a concern, because Prime Day is also about keeping members engaged with Prime and luring new people in – but for others the frequency of discounting online could fundamentally undermine their full-price integrity.

2017 Alibaba Singles' Day Global Shopping Festival Gala

Getty Images / VCG

And the seemingly unstoppable Amazon Prime train keeps on rolling. Up until a couple of years ago, Bezos’s strategy focused on the huge domestic US market and a handful of big international markets like the UK, Germany and Canada. But Amazon is pushing Prime into traditionally less lucrative markets like France and Mexico, principally by throwing Amazon Video and other digital services as well as Amazon Fire and Alexa devices into the bargain. And Prime Day is a great tool to make this expansion work.

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The company’s executives seem to be pleased with the subscription service performance so far: Amazon’s chief financial officer Brian Olsavsky said on a recent analyst call that the “Prime Day pickup” was stronger than anticipated last year, adding that the firm had a record number of sign-ups for the famed 30-days free Prime trials.

But Amazon is far from all-conquering. In China, Alibaba is the supreme leader by some distance. The Chinese company has been running a similar day since 2009 (albeit without the hook of a subscription), which makes Amazon’s Prime Day move feel a bit like a copycat of Chinese innovation.

Alibaba's event happens on November 11, a popular holiday called Singles’ Day (Guanggun Jie). Among all the theories around its origin, the most widely accepted story is that the holiday grew out of Nanjing University’s dorm culture. There, the theory goes, a bunch of male students wanted to break away from the monotony of being single and decided to celebrate an 'anti-Valentine's Day' on November 11 – a date that can be written as four '1's, or "four singles".

Alibaba transformed the day into a shopping festival, to get people buy gifts for themselves – and ultimately to induce a shopping bonanza during the slow period before the Lunar New Year season. The first year, there were only 27 merchants joining the event. Last year, this had grown to 140,000 brands and merchants taking part, 60,000 of them foreign companies.

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Gross Merchandise Volume (GMV) clocked in at 168 billion yuan (£19bn), a 39 per cent increase from 2016, with some 1.48bn transactions. The number of deliveries grew by 23 per cent in the same period. And over the first five minutes of 2016 Singles’ Day, customers spent $1bn – as much as Amazon’s entire 30-hour Prime event in 2017.

That much spending is powered by China’s rapidly growing middle class: in 2015, it spent $4.2 trillion; by 2030, that figure is estimated to be a whopping $14.3 trillion, according to a 2017 Brookings Institute report. In the US, meanwhile, middle class consumption in 2015 was $4.7 trillion – and is expected to remain the same all the way to 2030.

Unlike Amazon, Alibaba spices up its shopping experience with retail gamification and live video streams. For customers of the Chinese online retail monster, "shopping isn’t just about the purchase, it's rather a social engagement with a group of people with similar interests," says an Alibaba spokesperson. "It is about engaging with their favourite celebrities, influencers and friends, and discovering the latest trends in the industry based on their interests."